Deputy Prime Minister and Minister for Finance, Professor Biman Prasad, has reaffirmed the Government’s dedication to a long-term fiscal strategy aimed at maintaining economic stability over the next decade or two, rather than seeking quick solutions.
Professor Prasad emphasized that addressing the country’s economic challenges will be a significant achievement, laying a foundation for reducing the debt-to-GDP ratio. He noted that this undertaking is not something that can be resolved within a year or two but is a long-term commitment for future governments as well.
“The political will and national dedication to managing our debt have garnered approval from international agencies, financial institutions, credit rating agencies, and our development partners,” said Professor Prasad. “This positive recognition boosts confidence among investors, both domestic and foreign.”
He cautioned against the Opposition’s proposal to eliminate the 15 percent VAT, warning that such a move would lead to a substantial loss of revenue. “If we lower VAT from 15 percent to nine percent, we stand to lose $600 million in revenue. Each one percent reduction in VAT would result in approximately $100 million in lost tax revenue,” he explained.
Professor Prasad questioned how the Government could manage a fiscal deficit that could potentially rise to double digits and whether it is feasible to borrow an additional $600 million given current financial constraints. He emphasized that the 15 percent VAT was established based on comprehensive analysis and existing data.
Furthermore, he underlined the necessity of sufficient funding to ensure the smooth operation of government functions.